Keep student loan interest rates at a manageable level

Published 4:36 pm, Monday, April 22, 2013

Congress must act again to stop student-loan interest rates from doubling to 6.8 percent.

Lawmakers should know the drill by now. They voted last summer to extend the lower interest rate.

The interest rate of 3.4 percent expires in July, and a lack of action would be costly. The rate increase on federally subsidized Stafford loans would cost nearly 10 million borrowers about $1,000 each year over the life of the loan. That's real money to college students.

U.S. Rep. Suzan DelBene, D-Wash., is pushing a legislative solution that ought to garner support from her colleagues. She is co-sponsoring a bill that would keep the low interest rate for two years. Meanwhile, Congress would work on a long-term solution to slow the rapid accumulation of student-loan debt.

A long-term approach is needed. It must broaden access to college, and increase affordability and completion rates.

Half of all college students borrow to pay for school. The average student-loan borrower graduates with $27,000 in loans. They also face a weak job market. They should not be burdened with high interest rates as well.

College-debt strategies should prioritize low-income and middle-class students completing college without having to rely on loans.

A second priority ought to be no-interest loans and those with affordable, income-based repayment plans for middle-income students.

A Congressional Budget Office report from February said the federal government makes 36 cents off every student-loan dollar it spends. Student loans could bring in $34 billion in profit for the government next year.

The problem is not the revenue, but what ought to be done with it. It should be used to subsidize higher education.